Offshore trust scheme leads to former U.S. Attorney pleading guilty to tax fraud

In Florida it is almost inevitable that attorneys — and especially trusts and estates attorneys — will end up counseling clients who have existing relationships with off-shore trust companies or are considering some sort of arrangement involving an off-shore trust. Like any industry, there are good and bad actors doing business out there. Perhaps unfairly, my inclination is to approach the entire industry with more than my usual degree of skepticism (which says a lot!).

Recent events underscore why Florida attorneys would be wise to counsel caution when evaluating tax savings ideas proposed to clients by off-shore trust operators. In April of 2006 the heads of a Bahamian corporation operating under the name "Sterling Trust" were jailed in North Carolina after a sting operation mounted by undercover agents of the IRS in connection with an alleged tax fraud conspiracy. The trust angle was described in Executives With Bahamas Ties Jailed as follows:

The indictment, signed by Assistant U.S. Attorney Matthew Martens, says Graves, the Woltzes and Currin "would and did concoct foreign ‘dual trust’ arrangements so that wealthy United States citizens could evade federal income tax."

According to the indictment, the IRS undercover agents solicited advice from Graves on evading U.S. taxes on the fictitious sale of "gaming rights" for $10 million. Graves allegedly recommended a scheme known as a "dual trust structure" by which Sterling Trust would set up two trusts that would facilitate the evasion of the taxes.

Attorneys can get personally stung by this type of fraud when they step over the line from simply acting as counselors to affirmatively facilitating their cleints’ involvement in this type of scheme. As reported in Former U.S. Attorney to Plead Guilty in Tax Fraud Scheme, a distinguished former U.S. Attorney is facing up to 43 years! in prison because of his involvement . . . in addition to the personal catastrophe this must be for his family. Here are a few excerpts from the linked-to article:

A former U.S. Attorney, state judge and state Republican chairman has agreed to plead guilty to charges related to a tax fraud conspiracy, federal prosecutors in Raleigh, N.C., said Wednesday.

Samuel T. Currin will plead guilty to conspiring to launder $1.45 million through his law firm’s client trust account and to lying on his taxes by failing to report an offshore debit card account, prosecutors said. Three others also have been charged.

He could be sentenced to as many as 43 years in prison.

Tax attorney Ricky Graves; Howell Way Woltz, president of Sterling Trust in the Bahamas; and his wife, Vernice Woltz, a director of Sterling Trust, are also charged.